Megaworld: Real estate

THE COMPANY: Megaworld (MEG) is one of the country’s leading residential condominium developers and business process outsourcing (BPO) office space providers. Indeed, the company pioneered the development of mega-communities – integrated townships that locate residences, workplaces and commercial centres in one setting – with its flagship project, Eastwood City. This development is Megaworld’s first-ever integrated township project.

The company’s real estate portfolio includes residential condominiums, townhouses, subdivision lots, office buildings, commercial and hotel facilities. Its subsidiaries include Megaworld Land, Empire East Land Holdings (medium-cost housing) and Suntrust Properties (affordable housing).

1H 2013: Consolidated revenues registered an increase of 12% to P17.3bn ($416.9m), resulting from strong property sales (up by 12.7%) and a 25% increase in leasing income from its BPO and retail portfolio. MEG booked P38bn ($915.8m) in reservation sales in the first semester, 27% higher year-on-year, and is right on track to achieve its target of P70bn ($1.7bn) for 2013.

Net income attributable to equity holders grew by 17%, coming from the strong revenue growth and the slightly slower pace of the increase in costs and expenses. Overall, residential condominiums accounted for the bulk of the company’s earnings.

GROWTH DRIVERS: MEG is banking on the country’s solid macroeconomic fundamentals, the influx of overseas Filipino remittances and the strong consumer sector to drive its business. Furthermore, it will continue to build more office spaces and lifestyle malls to support the increasing demands of the BPO industry and retail consumers.

The Philippines now beats India as the world’s leading call centre destination, and the country is the third top destination for BPO companies. Indeed, the Information Technology and Business Processing Association of the Philippines estimates that the information technology and BPO industry is expected to post $16bn in revenues by the end of 2013.

This is set to be followed by an estimated 17% year-on-year growth in the next three years, to reach revenues of $25bn by 2016, accounting for approximately 10% of the country’s GDP. This will boost demand not only for MEG’s office spaces but also for its retail and residential projects, as consumption increases and as more people move to urban areas. From about 770,000 currently employed, the BPO industry is expected to directly employ about 1.3m Filipinos by 2016. Moreover, MEG is seeking to launch 25 residential projects offering 12,000 residential units in 2013. For the first half of the year, the MEG group launched a total of 14 projects; this includes One Eastwood Avenue Tower 2 in Eastwood City; The Florence Tower 1 in McKinley Hill; Manhanttan Plaza Tower 2 in Araneta Centre, Quezon City; The Mactan Newtown in Cebu; and San Lorenzo Place Tower 3 in Makati City, among others.

BUSINESS PARK: Megaworld is looking to reshape Metro Manila and the other major cities’ skylines with its growing portfolio of large-scale office projects. For example, MEG increased its investment commitment to the 72-ha Iloilo Business Park to P35bn ($843.5m), up from P25bn ($602.5m) originally, in the next 10 years, making this township the company’s single-biggest project outside Metro Manila. The Iloilo Business Park is envisioned to be a premier mixed-use business, tourism, commercial and residential centre for Region 6.

As for its leasing business, MEG estimates that by the end of 2013, the company’s portfolio will include more than 500,000 sq metres of leasable office space, with the completion of McKinley Hill Science Hub Towers 3 and 4; the Venice Corporate Centre; and 8 Campus Place Tower A, B and C. These projects are all located in Megaworld’s McKinley Hill township. Leasing allows the company to generate a more stable source of recurring cashflows.

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